IT Spending Points of Light Appear

Despite the global slowdown in corporate IT spending, recently released reports show two segments of the economy-financial service companies and the federal government-will boost technology investments next year and beyond.

Despite the global slowdown in corporate IT spending, recently released reports show two segments of the economy—financial service companies and the federal government—will boost technology investments next year and beyond.

U.S. banks, for example, are expected to increase their technology spending this year to $34 billion, up more than 4 percent from 2001 levels, according to a report from research firm Celent Communications LLC in Boston.

In a separate report from IT services firm Input Inc. in Chantilly, Va., the U.S. federal government is expected to increase spending on CRM (customer relationship management) systems and services from $233 million in 2001 to $522 million in 2006. The forecast represents a compound annual growth rate of 17.5 percent over the five-year period.

The findings are symptomatic of a shaky economy, where some industries and companies are faltering while others are expanding, experts say. Overall, for example, IT spending has slowed. The Yankee Group in Boston recently estimated that IT spending increased in 2001 by just 1.1 percent. In many sectors, however, spending during a downturn is viewed as necessary to retain competitive advantage, said Octavio Marenzi, managing director at Celent.

"Banks have continued to increase their IT budgets, even while many other industries are holding back," Marenzi said in a statement. "In part, banks have little choice in this—a very large proportion of their spending is on maintaining existing infrastructure. Banks are also increasingly viewing technology as a competitive differentiator."

The Celent study reports that top banks are spending in excess of $2 billion each annually on technology, with the largest banks expected to spend in excess of $5 billion in 2002. Consolidation among commercial and investment banks is the biggest factor in increased IT spending. In fact, the largest commercial banks spend as much as 25 percent of their total expenses on IT.

E-government, on the other hand, is driving federal spending on CRM systems and services. The Input report reveals spending on technology will be highest among civilian agencies with large customer service obligations such as the Internal Revenue Service and the Social Security Administration.

"We expect significant growth in [CRM] as the requirements for electronic government and customer service increase," said Payton Smith, an analyst at Input, in a statement.